The British banker, who only joined Deutsche seven months ago, maintained that there was no reason to panic and called on his staff to spread that message to clients.

“You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position,” he said in a letter to employees.

His plea was followed by Germany’s finance minister Wolfgang Schaeuble who took the unsual step of also trying to reassure investors in the lender. “I have no concerns about Deutsche Bank,” he said.

Shares in Deutsche tumbled another 4.7pc on Tuesday. The bank’s shares fell to €13.26 and are now down 46pc since the start of the year and 58pc in the last six months. Last month the bank reported a €6.8bn (£5.3bn) loss for 2015.

Deutsche has led the wider banking market down as fears spread over the profitability and financial stability of Germany’s biggest bank. Yesterday Swiss institution Credit Suisse’s shares were down by almost as much, plunging 7.75pc. Spooked investors also sold off shares in other banks, leaving Barclays down 5.2pc, BNP Paribas down 4.8pc and Italy’s Intesa Sanpaolo down 4.9pc.

Markets wrap

The FTSE slumped to its lowest level since August 2012 and European equities sold off as markets endured another day of turmoil driven by worries a new banking crisis could erupt in a fragile global economy.

Britain's benchmark blue-chip index ended the day down 1pc to close at 5632 points, it lowest finish in more than three years.

In Europe, the pan-European FTSE Eurofirst endured its seventh consecutive day of declines, falling by as much as 2.6pc in intraday trading.

European banks were the biggest casualties with another 4.5pc wiped off the Euro Stoxx 600. The index has now fallen to its lowest point since the height of the eurozone turmoil in the summer of 2012 when investors were forced to take a "haircut" on Greek government debt.

Western markets were gripped by risk-off sentiment after Japan's Nikkei has closed down 5.5pc, and Asian banks declined by 7pc, in early morning trading.

Japan also became the first major world economy to see borrowing costs on its 10-year bonds fall into negative territory - effectively penalising investors for holding government debt.

The flight to safety was triggered by a heady mix of fears - including concerns that central banks were stoking a new crisis by embarking on an unprecedented experiment with negative interest rates.

"[Monetary policy] is trying to stimulate aggregate demand and the honest truth is that it's not capable of doing that in a sustainable way", said William White at the Organisation of Economic Cooperation and Development.

Perennial concerns about an oil glut also sent Brent crude down by 2.2pc to as low as $32 a barrel.

Evidence of a dramatic slowdown Germany only piled onto woes that the world would struggle to get out of an insipid growth trap this year. German industrial production fell by 1.2pc at the end of last year, it sharpest fall since August 2014.

Specifically, the EU's Bank Recovery and Resolution Directive (BRRD) will require creditors to incur losses of at least 8pc of their total liabilities before receiving official sector aid. Britain will not be subject to the rules.

Italy has been one of the fiercest critics of the new rules. The country's central bank has called for a revision of the directive, arguing that it will actually hurt many ordinary and poor in the country. Italian banks are in a bit of a state, with rising bad loans, and a have a banking system where bonds are held by many pensioners.

Four small Italian banks have already needed restructuring under the tough rules, which have left shareholders and junior bondholders out of pocket. Economists are already saying that the crisis in the financial system can come to infect the Italian economy - which is the third biggest in the eurozone.

The introduction of the rules at the start of the year didn't cause much of a ripple in the market, but mixed with fears about bank profitability and negative interest rates, the BRRD - ostensibly a good way to protect taxpayers - is now a source of new danger for the financial system.

Deutsche woes bring down the German government

Mr Schaeuble's comments earlier today, along with those of his central bank chief on the health of Germany's biggest lender come as markets have started to implausibly speculate on the safety of German government debt.

The cost of insuring against a default on German has rocketed in the last week to highs last seen in 2014......[ ]

Japan’s
Nikkei index plummeted more than 950 points on Tuesday, its biggest
loss in one day since May 2013, as the fears over the global economy
saw a continuation of the previous
day’s selloff in
Europe and the US.

The Nikkei dived
5.1% to 16,132.25 in morning trading and extended losses into the
afternoon, while Australia’s S&P/ASX 200 fell 2.6% to 4,946.70.
Markets were also down in the Philippines, Indonesia, Thailand and
New Zealand. The yen meanwhile briefly soared to a 14-month high
against the US dollar.

Fears
over weak growth prompt global stock markets to fall

The
MSCI’s index of Asia-Pacific shares outside Japan fell
1% and might have fallen further had several Asian markets not been
closed.

Markets
in China,
Hong Kong, Taiwan and South Korea were closed for Lunar New Year
holidays. Most markets in the region will re-open from Wednesday,
with Chinese markets returning next week.

The
volatility affecting global markets last month appears set to
continue amid concern about Chinese economic growth, falling oil
prices and speculation that the US federal reserve could change
course with interest rates.

“The
combination of concerns that the United States could be heading
toward a recession and the global stock sell-off is curbing risk
appetite and is sending investors to the safe-haven yen,” Takuya
Takahashi, senior strategist at Daiwa Securities, told Kyodo News.

After
hovering around the 117-yen line on Monday, the Japanese currency
briefly rose to the upper 114 zone to its strongest level against the
dollar since November 2014. Investors regard the yen as a “save
haven” currency when global markets are hit by the kind of turmoil
witnessed in recent weeks.

The
yen is expected to make further gains – a trend that eats into the
repatriated profits of Japanese auto and other exporters. Three-month
dollar/yen implied volatility – which indicates how much currency
movement is expected in the months ahead - reached 12.137% its
highest since September 2013.

Responding
to the yen’s rise, Japan’s finance minister, Taro Aso, told
reporters: “It is clear that recent moves in the market have been
rough. We will continue to carefully monitor developments in the
currency market.”

The
dollar was last at 115.26 yen, down 0.6%, after dropping as low as
114.75.

Kaneo
Ogino, director at foreign exchange research firm Global-info Co in
Tokyo, described it as a “panic situation”.

Ogino
added that investors would be closely watching the US federal reserve
chair Janet Yellen’s testimony to the house financial services
committee on Wednesday for any clues that the central bank might be
prepared to slow future rate hikes as market turbulence and global
economic uncertainty continue.

“The
focus is now on Yellen’s comments tomorrow, and how she’ll
respond to these latest market conditions,” Ogino said.

The
flight to safety also saw Japanese government bond yields dive below
zero for the first time, extending a downtrend sparked by the Bank of
Japan’s surprise move last month to adopt
negative interest rates on
some commercial lenders’ deposits.

“The
Nikkei has been well and truly savaged today,” said Chris Weston,
chief markets strategist at IG in Melbourne. “It is clear that
strong buying in the Japanese government bond market is not going to
drive the (yen) weaker in times of extreme volatility, so negative
rates have little bearing on markets.”

The
Bank of Japan’s rates decision has prompted fears that after years
of monetary easing, central banks have few avenues left to explore to
encourage investment and boost growth.

Talk
of an impending recession in the US, however, is creating speculation
among investors that the federal reserve will put on hold its
attempts to normalise rates.

“The
‘fear factor’ in markets has morphed from being about an emerging
market hard-landing and collapsing oil prices to being about the
extent of the slowdown in the developed world and the ability of
central banks to reflate asset values yet again,” said analysts at
Citi in a note.

The
pessimism isn’t universal, however. In a report released at the
weekend, Goldman Sachs said there was just a 25% risk that
recession would hitindustrialised
economies in the next year, rising to 34% over the next two years.

Both
forecasts fall below the average risk seen in the past 35 years,
despite the turmoil in financial markets. In the US, the probability
of a recession in the next four quarters is just 18%, and 24 in the
eurozone, according to the US bank’s economics team.